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To Provide Employment to the Youth and to Develop Baramula District of Jammu and Kashmir, Jyoti Power Ltd. Decided to Setup a Power Plant. for Raising Funds the Company Decided to Issue 8,50,000 Equity Shares of Rs.10 Each at a Premium of Rs.3 per Share. the Whole Amount Was Payable on Application. - Accountancy

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To provide employment to the youth and to develop Baramula district of Jammu and Kashmir, Jyoti Power Ltd. decided to setup a power plant. For raising funds the company decided to issue 8,50,000 equity shares of Rs.10 each at a premium of Rs.3 per share. The whole amount was payable on application. Applications for 20,00,000 shares were received. Applications for 3,00,000 shares were rejected and shares were alloted to the remaining applicants on pro- rata basis.

Pass necessary journal entries for the above transactions in the books of the company and identify any two values which the company wants to propagate.

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Solution

Journal

Date Particulars L.F. Dr.(Rs.) Cr.(Rs.)
 

Bank A/c                                                                                                                                      Dr

          To Equity Share Application & Allotment A/c

(Being amount received on 20,00,000 equity shares @ Rs.10 each at a premium of Rs.3 per share)

 

Equity Share Application & Allotment A/c                                                                                         Dr

           To Equity Share Capital A/c

           To Securities Premium A/c

           To Bank A/c

(Being application money is transferred to share capital and excess amount refunded)

 

2,60,00,000

 

 

 

2,60,00,000

 

 

 

 

 

2,60,00,000

 

 

 

85,00,000

25,50,000

1,49,50,000

 

 

The following are the two values that X Ltd. Wants to propagate.

1. Employment opportunities in the backward areas.

2. Value of Equality by allotting shares on pro-rata basis to 17,00,000 shareholders.

Concept: Issue at Par and Premium and at Discount
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